From the U.S. Government Accountability Office, www.gao.gov
Transcript for: America's Fiscal Health
Description: The United States faces a highly challenging fiscal future.
We discuss our update on the fiscal condition and long-term fiscal
health of the U.S. government in this podcast.
Related GAO Work: GAO-18-299SP: The Nation's Fiscal Health: Action Is
Needed to Address the Federal Government's Fiscal Future
Released: June 2018
[ Background Music ]
[ Susan Irving: ] It's time to pay attention, it's been time for a
while, but the long-term is getting closer.
[ Matt Oldham: ] Welcome to GAO's Watchdog Report, your source for news
and information from the U.S. Government Accountability Office. I'm Matt
Oldham. For the second time, GAO has released a report assessing the
nation's long-term fiscal health. It's looking at the challenges we
could face in the coming years if our current path continues unchanged.
I'm with Susan Irving, she's a Senior Advisor on debt and fiscal issues
here at GAO, and she's here to talk to me about this new publication on
the nation's fiscal health. Thank you for taking the time to speak with
me, Susan.
[ Susan Irving: ] Thank you for having me.
[ Matt Oldham: ] So, what does our long-term fiscal health look like?
[ Susan Irving: ] Well, the bottom line is it's unsustainable. It means
that at the moment, the debt our government is incurring is growing
faster than the economy to support it. We call it the debt-to-GDP ratio.
You can't have a situation where debt grows faster than the wealth of
the nation that has to support that debt. Going forward, the path has to
change.
[ Matt Oldham: ] When it comes to projections like this, and when we
talk about debt-to GDP-ratio, what sort of information do you use to put
into an assessment like this one?
[ Susan Irving: ] We run off CBO's, Congressional Budget Office's,
10-year projection plan for the first decade. The Congressional Budget
Office's charge by law, looking at the laws Congress and the President
have enacted. And based on an economic projection, looking at what
happens if you in effect program the computer to just keep them going.
They run both a baseline and something that we call an alternative. For
example, when something is scheduled to expire, but probably isn't going
to expire, we'll assume it continues. We then run a projection or
simulation for going out further. We use that data, we also use the
Trustees for Social Security and Medicare, their reports on what those
funds look like. And based on that, we run simulations that are not
designed to be specific projections, but nonetheless give you, we think,
the best look at what the future will look like under reasonable
assumptions.
[ Matt Oldham: ] Are there any programs in particular or are there any
policies in particular that are driving the trends in your simulations?
[ Susan Irving: ] The simulation is driven, in all cases, by the gap
between revenues and spending. On the spending side of the budget, there
are three drivers. Two of them are driven by policy: healthcare spending
and social security. The third is a result of decisions, which is
interest. Healthcare costs have been growing faster than the economy.
So, unless we can figure out how to slow the growth of healthcare costs,
we're going to be in the soup for a long time. Social Security doesn't
grow as fast, but it's very large and it's not shrinking. I like to tell
people there are lot of people in my generation, and we're planning to
live forever, so somebody better do something. Interest costs are a
function of two things. One is, how much debt are we financing? And the
other is, what are interest rates? We have been very lucky for the last
few years. Even as the economy comes out of this recession, interest
rates have remained low. That is unlikely to last, and eventually,
interest will become the largest single expenditure in the budget.
[ Background Music ]
[ Matt Oldham: ] It sounds like unless Congress and the administration
take action, and soon, the long-term fiscal projections for the federal
government will continue on a path that is unstainable. And the
debt-to-GDP ratio would reach record highs within 14 to 22 years. So,
Susan, what can the government do to reverse these dire projections?
[ Susan Irving: ] What we need is to reach agreement on how to think
about addressing both near term needs and wants, and the long-term
challenges we face. This will require making hard decisions on both the
spending and revenue side of the budget. As the Comptroller General
likes to say, "We need to do this by cutting spending's growth, finding
a way to raise more revenues, or more likely doing both"
[ Matt Oldham: ] So finally, Susan, what do you believe is the bottom
line of this report?
[ Susan Irving: ] It's time to pay attention. It's been time for a
while, but the long-term is getting closer. The bottom line is,
continuing on the -- today's path, leaves very little room for meeting
future challenges or surprises, and increases the chances of fiscal
crisis. The American government and the American people, who have always
met major challenges, need to start looking at this one, reach agreement
on a path forward, and begin to act on it.
[ Matt Oldham: ] Susan Irving is a GAO Senior Advisor on debt and fiscal
issues, and she was talking about a GAO report on the future of the
nation's fiscal health. Thank you for your time, Susan.
[ Susan Irving: ] Thank you for your interest in this topic.
[ Background Music ]
[ Matt Oldham: ] And thank you for listening to the Watchdog Report. To
hear more podcasts, subscribe to us on Apple Podcasts.
[ Background Music ]
[ Matt Oldham: ] For more from the congressional watchdog, the U.S.
Government Accountability Office, visit us at gao.gov.